Xyrus

Consumption, Cacophony and Clarity

mkreisel: What's preventing the US from doing the same is ENORMOUS debt, and the fact that the developing countries are using high tech that's already developed.

They can afford to build up infrastructure because they don't have any and a lot of people are dumping in money in the hopes of big returns. And despite being piss poor, their debt levels are minuscule compared to ours.

"-20% GDP? Not in a fiat money superpower like the United States."

Why do people keep bringing this up? Being a super-power means jack. Our GDP is the consumer. If the consumer isn't spending, then th GDP tanks. If our debt levels are so high no one wants to lend to us, our GDP tanks.

Nothing is "too big to fail". All it takes is a few decades of fiscal mismanagement and you can drive any country into the ground. Case and point: if it wasn't for countries like China buying up our bloated debt, our government would suffer a financial collapse. It's foreign debt buyers that are keeping our government running. Does this sound a like a "too big to fail" scenario?

On other comments, I don't see how financial collapse == WW3. That makes no sense. We'd probably see civil unrest and martial law. Maybe even a civil war. But nuking other countries just because we ran our own country into the ground doesn't even begin to make sense. That would just make things worse.

A US collapse would hurt the world economy quite a bit, but they would recover as the Asian consumers replace their US counterparts. The US however, without much more than the consumer supporting the economy, would be in really bad shape.

Right now, there are a lot fairly somber data coming out about the US economy, debt, and such. I think we will continue to see a slide. But a full on collapse is still at least 20 years away.

~X~

2 Reasons to Hold a U.S. Stocks-Dominated Portfolio

Fareed Zakaria is either incredibly naive or deliberately misleading.

The US economy is 70% consumer spending on products from mainly foreign countries. Our innovation is being shipped off to the lowest bidder. Our education systems has been degrading over the decades, and now there is even an anti-science bias. Our medical system is so messed up it takes a damn Ph. D to decipher, and you need to make as much as one to get solid healthcare.

Now add to this our $10 trillion dollar debt and growing and the fact that our spending is exceeding tax revenue by close to a half-trillion a year, and the fact that we have $54 trillion in obligations and it keeps getting bigger every single year.

This is the elephant in the room no one has been talking about except for a precious few (who are often laughed at and derided). This country has some very serious issues to work out fiscally and every year that goes by just makes it less likely we will get out of the hole.

"We spend MASSIVE BUCKS on military....w00t!" And that has led to the downfall of many an empire. Instead of taking that money and maybe doing something a little more productive like investing in our own country, we send it overseas for military bases and bombing runs. A military means little when you're country fiscally collapses.

The key for a country's survival is a sensible fiscal policy. Without that, then it is only a matter of time. There is only so much debt others will buy before they cut off the spigot, and that will be a painful day indeed.

The interest on the debt makes up over 13% of the budget. The top three expense items (military, social programs, and the interest payments) EXCEED that tax revenue by themselves. You can read all the happy happy joy joy books you want claiming the US is "too big to fail", but that fact by itself should be at least a concern.

There have been many things that have been "too big to fail". Don't fool yourself into thinking that the US is anything special in that regard. The only thing that will keep this country from failing is competent leadership on all fronts, including fiscal. It's something we have been sorely lacking.

~X~

The New Frontier Markets ETF: Can You Handle It?

The problem is that for a frontier market etf, it certainly has ALOT of emerging markets in there. I think I'll a bit longer to see what else comes out before jumping onto this ETF.

~X~

What's Keeping the Dollar Down?

Herohero: You are being short-sighted. ALWAYS have a backup plan. The last place you want to be is in a country like the US undergoing a full on fiscal collapse. Remember, the British Empire was also "too powerful to fail" and it did.

Kotika98: That's not true. The value of the dollar has fluctuated quite a bit since being decoupled. It has had periods of large gains as well as fall-offs. However, it is the nature of fiat currency to devalue over time.

Great nations rise and fall, and there has never been one who hasn't fallen at some point. But there is a difference between a controlled fall (like the British Empire) and a catastrophic collapse. We are actually in the process of decline as our expenses at maintaining our "empire" are far exceeding our ability to pay them. As the author points out, our situation gets worse every year we don't enforce fiscal responsibility. We can either choose a gradual contraction or a spontaneous collapse. I prefer the former.

Surgcare: I'm not sure where you're getting your information, but both sides have more than their share of the blame in this. Keep in mind that under a republican administration, we have had the largest increase in government spending as well as the largest deficits, and a crumbling economy.

Here is another thing to keep in mind: Capitalism only works if people have money. Right now, 90% of the wealth in the country is controlled by 10% of the population. That's a pretty big disparity. Left completely unchecked, and you end up something like the French Revolution.

Companies have not been run out of America. They have willingly left in search of cheaper materials, cheaper labor, and less oversight. All those safety standards that a lot of people take for granted now are a result of factory workers who got tired of loosing limbs in poor working conditions (and poor wages) and decided to do something about it.

Of course, you could repeal the safety standards, the pay, and all those other little niceties and reintroduce the effective sweatshop in America. But if you know your history, then you'd realize that's a sure way to get a lot of people very angry very quickly.

The trick is to find a reasonable balance to maintain a working system. Pure capitalism doesn't work, because of greed (many historical examples of people doing really bad things in the name of money). Pure communism doesn't work because we aren't bees. Pure socialism doesn't work because people always strive for something better.

But to naively suggest that the current state of everything is all due to liberals is shear nonsense. We've gotten to this point through the joint efforts of both. And it will take the joint efforts of both to fix this mess.

~X~

Why Tax Credits for Health Insurance Won't Work

Waldipup, here's a big negative: How can you give tax credits when the national budget is already a half trillion in the hole?

What neither candidate seems to realize (and a startling number on here as well) is that we are burying ourselves in debt. Obama wants universal healthcare and McCain wants tax credits. Ok, where is this magical money going to come from? People want to be taxed less. Ok, then why do you continue to elect people that get us into situations like Iraq and give us more government bloat like the Department of Homeland Security?

THESE THINGS COST MONEY PEOPLE. And it's money we don't have. That $50 billion in rebate checks? Thank China, not Bush. Those tax cuts? Thank China, not Bush. Thank China because they are one of the largest loaners to the US, and without them buying we would be completely bankrupt in a matter of months.

Every time we increase spending or decrease taxes, we mortgage a little more of our kids and their kids futures way.

One of the the takeaways from a site like this should be that if you want to retire well, you have to practice fiscal responsibility. Fiscal responsibility means keeping your debt low and keeping spending under control. Neither of which our government is doing.

McCain wants to keep the tax cuts. Great. Cut spending to pay for it then. Obama wants universal healthcare. Awesome. Cut spending and pay for it.

If spending isn't cut or taxes aren't raised (by alot) or some mixture of the two, then it doesn't matter who is elected. Our country will continue to spend it's way into oblivion.

By the way, to get us back to sanity all one needs to do is cut a half-trillion off the federal budget. The three main expenses that make up over 90% of our budget are social programs, military, and the interest payments on the debt. We can't cut the interest payments, so you've got essentially two areas you can cut from: military and social programs.

~X~

Will Thursday's Retail Sales Report Be Strong or Weak?

If it's strong, it will have no impact. Why? Because everyone expects it to be stronger than normal because of those ridiculous fed rebate checks.

If it's weaker, that's when we'll see some interesting action. Mostly down.

~X~

Shrinking U.S.A.

Not necessarily. The dollar dropping is only one symptom of the larger issue: The rest of the world is growing up.

The days of the US being the economic bully are coming to an end. And it couldn't come at a better time. We've become both complacent and arrogant on the world stage. Soon we may actually have to (heaven forbid) do some actual negotiation instead of rattling our economic/military sabers to get our way.

We've been on top for so long that I think we've actually forgotten how to be number one. The rest of the developed world is surpassing us on almost all fronts, from healthcare to education, to internet access.

News flash: We aren't number one anymore. Nor will we be if we keep up with our current socio-economic policies. With our $10 trillion in debt and more piling on everyday, exactly how long do you think our government will last? The GAO paints a pretty grim scenario.

Oh but we have the largest consumer base in the world! For how long? India and China are growing fast. Soon, even that banner will fall.

We've got to stop thinking the world revolves around us and start thinking that we are just one player on the world stage. Until we do, we will continue to marginalize ourselves while the world catches up and then surpasses us.

~X~

El-Erian's Recommended Allocation vs. Harvard, Yale

This is kind of amusing. That's pretty much my allocation strategy...right down to the ETFs. :)

~X~

Investors at Risk of Losing Everything

God is a terrorist. You have to do what he says or he will burn your infidel ass for eternity. Using the threat of punishment in order to get others to do what you want is a characteristic of sex offenders, not a characteristics I would hope to find in an all knowing, all loving, omnipotent space fairy.

You can pray to the magical sky wizards if it makes you feel better. But I seriously doubt they're going give you any help. Least of all, in the matters of feeding your greed.

And for the record guys, if you take a look at the history of the stock market and which administration was in power, you'll see that the market seems to do better with democrats in power. So what does this have to do with the markets?

NOTHING. Although, the last person to actually balance the budget was a democrat...oddly enough.

Double digit interest rates? BRING 'EM ON! That's what we need to shore up the weak American Peso. The constant devaluing of the dollar is one of the main culprits to the commodities increase. The dollar has lost over 40% of it's value over the past 8 years. Time to start doing something about it.

Neither Obama nor McCain are good choices, especially given the magnitude of the more serious problems we face. However, Mccain is the first candidate I can remember that actually scares me. I think he may actually be worse than Bush. But I digress. One of the bigger issues is how to prevent us from spending ourselves into oblivion. Mccain's inane ravings about staying in Iraq and pork isn't going to cut it (pork is less than 1% of the budget), and Barack "The Messiah" Obama has grand plans for a universal healthcare system that has no way to fund it. We can't even pay for what we have now.

No matter who wins, we will probably lose though we will probably lose a little less with Obama. Either way, expect higher taxes.

But don't blame me. I'm voting for Cthulu.

~X~

Black Gold or Yellow Gold?

TedSpick, ANWAR does not contain enough oil to do squat. At our consumption rate we'd burn through that in years, not decades. And that's assuming consumption wouldn't increase over that time frame (highly unlikely).

The Iraq war was a complete an utter farce, and that has been pretty well established. They had trouble just keeping the lights on at night, let alone produce weapons of mass anything. Whatever the reasons for the invasion, you can be sure that WMD's were merely used to try to scare America stupid (which, apparently, is very easy to do). In fact, if we would stop screwing around in that area of the world overthrowing democracies and installing ruthless dictators, we'd probably have a lot fewer problems. And more money to spend here. And a balanced budget.

A sensible energy policy would go a long way to help, but secret meetings with big oil a la Dick Cheney are not the way to go about it. High oil is, IMHO, a good kick in the thigh-bangers for this country.

More oil is not the answer, and will at best provide temporary relief.

~X~

Ethanol Is Oversold: Three Bounce Stocks - Barron's

Ethanol from corn is a bad idea, as I've said before. Corn is harsh on the soil, has long growing season, and is much better as a fuel for humans than vehicles.

Once they use cellulosic sources (agri-waste, hemp, switch grass), things will be better. But corn gives a horrible yield. Perhaps people are just coming to realize that corn is not a good fuel source. It seems as if congress may finally be getting that clue.

~X~

Stock ETFs: Oil Price Increase Causes June Gloom

Right now I don't see a correction. There is still way to much hoarding (demand) going on.

I don't necessarily agree that speculation is a major factor. I'm sure it plays a part, but I think the larger market is responsible.

I also don't agree that the price will have any appreciable effect on demand unless it gets really high, at least in the US. Unlike Europe, we're built on sprawl. Our public transportation system is stigmatized (and incredibly inadequate). And still a large number of homes use oil heat in the northern states. Companies still need to get goods from point A to point B. I think it will take higher prices before we see any appreciable drop in demand (more than fractions of a percentage point on a holiday weekend at any rate).

Here's the scenario I see playing out right now. Oil is an essential commodity for a number of nations. A lot of companies sell petroleum based products, from plastics to gasoline. Their profit margins depend on the price of oil. Now they've been seeing oil climb higher for the past few years due to unrest and increased demand. Since these companies have competitors, it would be in their best interests to secure oil at lower prices in order to undercut the competition. So, in the face of advancing oil, they begin buying larger stocks of oil at what they hope will be lower prices than what they will be in the future, a.k.a hoarding. But this hoarding, in turn, creates upward pressure on prices. Wash, rinse, repeat. A bit later in the game, the speculators hop on for the ride, also having an effect (driving prices up a little higher). More companies become paranoid as oil continues to increase, which increases hoarding, which increases speculators to ride the "unstoppable" oil bull.

And it is unstoppable, until someone stops the music. The question will be who is the one left without a seat? The speculators? The companies? The producers? That all depends on how the music stops. :)

There will be a correction, that much is certain. Just when that correction occurs, how much it will be, and who will take the brunt of it will be an interesting scenario to play out. Ideally it would be a slow gentle correction, but it is looking like it may be a sudden plunge.

~X~

Intelligent Diversification with ETFs

Thanks for the spam speculator, but the statistics don't lie. For 80% of "professional" fund managers, the never break index performance. For individual investors, the stats are worse. And for day traders, 95% wash out.

Very few, and I do mean very few, have beaten market indexes over the long haul. You may be one of those few. Then again, you may be one of those few who win the lottery. The point is, honesty is something that has been lacking in the markets for quite awhile, and I would appreciate it if you were honest.

For example, you're statement of "if you want low returns" is utter crap. VWO has returned over 20% annualized since inception. The commodities indices have done even better. And even the regular S&P yields 9-10% over the long haul.

Even the great Warren Buffet, the Oracle of Omaha, had a hard time topping 30% a year. And those were his good years.

The fees will not eat you up. The Vanguard ETF's have expense ratios down to less than .20%, and some less than .10%.

The simple truth is, for the vast majority of investors simply riding the market will be far more profitable the trying to beat the market. When that changes, perhaps then I listen to yet another ad laden investing site on the internet. But for now, kindly refrain from driving up traffic to your site with inane statements. It just makes you look like yet another "EARN 300% WITH MY SUPER L33T INVESTMENT PLANZ! I AM THE SHIZNIT!" site.

~X~

Investing Changes Under a New Tax Regime

It doesn't really matter who gets elected, taxes HAVE TO raise. You can probably count on the raises being investment related at the very least.

Or rather, either taxes have to raise or government spending needs to be DRASTICALLY reduced. Which do you think is more likely to happen?

On one side we have McCain, who really has all of the financial know-how of an amoeba. I wouldn't trust that guy to balance his own checkbook, let alone approve national budgets. He rattles on and on about earmarks and pork. That's less than 1% of government spending. The cash suckers are the military and social programs. Well he certainly wants to keep military spending high, and there's no way he's going to get a social cut through a democratic congress (not to mention he'd be eaten alive by the media for cutting social programs in a down market). Regardless, he can want to cut taxes all he wants. It's not going to change the fact that our government is flat broke, and we're crossing the $10 trillion dollar mark in debt.

In the other corner we have Barack "The Messiah" Obama. He certainly is a charismatic character, but charisma doesn't balance budgets. Universal Healthcare? How? Where is the money going to come from? In a couple more decades we won't even be able to handle our current social programs. Raise taxes? That's going to require quite a raise, as we can't even cover what we are currently spending. We could cut military spending (like get out of Iraq); that would get us closer to a balanced budget, but we'd still need tax raises to cover the bill.

In truth, I don't envy the position either would have after the disaster of the last 8 years or so. The most likely candidate that would have had the brass ones to do what is necessary for balancing the budget was Ron Paul. Now, it's 6 one way half-dozen the other. No matter who gets elected you can count on more taxes on the rich and more taxes on investments. By that time the poor won't really have any money to tax, since it will be all spent on food and gas. Best case, count on the rates before Bush made his idiotic decision to cut taxes while increasing spending further burying us in the whole with our future sugar daddy China.

~X~

KBE's Forward Yield Pays You to Wait

I'm actually surprised stockholders aren't going all French Revolution on these CEOs with the golden parachutes.

I'm still waiting to see who's going to limp away from the trainwreck known as financials. I'm staying away until the mess sorts itself out (or until Uncle Sam uses up my tax money to bail everyone out). In my opinion, it's still got a while to go. I'm not about to jump overboard with anchor to flee a sinking ship.

In the meantime, there are safer ways to get decent yields without the risk of financials.

~X~